¶1. (S/NF) SUMMARY: Shell’s regional executive vice president for
Africa Ann Pickard and government relations representative Peter
Francis met with the Ambassador on January 27 in Abuja and provided
an update on problems in the oil and gas sector. Pickard said that
things were going from bad to worse, especially the security
situation. She said that Nigeria now had one of the highest negative
ratings for maritime operations, creating problems for Shell in
hiring oil tankers to load, as tanker operators will work only under
highly selective conditions. Last year there were about 80 piracy
attacks on land and water combined. This year already 15 have been
tallied, which includes 3 for Shell and 3 for Exxon. On corruption,
Pickard said that Nigerian entities control the lifting of many oil
cargoes and there are some “very interesting” people lifting oil.
Oil buyers would pay NNPC GMD Yar’Adua, Chief Economic Advisor Yakubu
and the First Lady Turai Yar’Adua large bribes to lift oil. Pickard
also reported an instance of the Attorney General Aondoakaa allegedly
soliciting a $20 million bribe to sign a document. The International
Oil Companies (IOC) are quite concerned about the “very flawed” new
petroleum sector energy bill. The IOCs will be asking U.S., Dutch,
and U.K. COMs to convey points on the bill to GON policymakers.
Pickard agreed that the President’s health is a guessing game. She
said that in her recent meetings with Yar’Auda he seems alert, though
very drawn in the face, thin, and frail. Her information is that the
President was not in danger of dying soon, but also was unlikely to
ever fully recover from his ailments. (Note: see septel on oil/energy
sector issues for the Ambassador’s meeting with the new Minister of
Petroleum Resources. End Note). END SUMMARY.

¶2. (C) Shell’s regional executive vice president for Africa Ann
Pickard and government relations representative Peter Francis met
with the Ambassador on January 27, 2009 in Abuja and provided an
update on problems in the oil and gas sector. Pickard reported that
Shell’s meeting with Minister of Petroleum Resources Dr. Rilwanu
Lukman scheduled for earlier that day had been cancelled; the third
week in a row where key appointments had fallen through, with the
excuse of being summoned to the Presidential Villa. (Note: Emboffs
have observed that meetings with ministers and senior staff are
indeed often cancelled with the explanation that they have been
summoned to the Presidential Villa, even when the President is out of
town. End note). Econ Counselor and Econoff (notetaker) also
attended the discussion.

– – – – – – – – –
FROM BAD TO WORSE
– – – – – – – – –

¶3. (C) The Ambassador took the opportunity to share with Pickard that
the Mission was in the midst of completing its Strategic Plan and
asked Pickard where she thought Nigeria was headed. Pickard said that
things were going from bad to worse, especially in terms of security.
She said that Nigeria now had the highest negative rating for
maritime security, creating problems for Shell in hiring oil tankers
to load; tankers will work only under highly selective conditions.
She also noted that late on the evening of Saturday January 17,
Nigerian militants attacked and boarded two vessels at a Shell crude
oil loading platform in Bonny and took eight crew members hostage.
Standard procedure on the tanker was followed: the ship went into
immediate lock down; there were no injuries or fatalities from the
boarding. The eight Nigerian crew members who were taken hostage were
later released. The pirates who went through the sections of the
boat to which they were able to gain access, smashing and stealing
computers, electronics, and personal items of the crew members. The
second vessel was a tug boat towing a supply vessel from Bonny to
Calabar. Last year there were about 80 incidents of piracy; this
year already 15 had been tallied, which includes 3 for Shell and 3
for Exxon. GON officials have told Shell to “hire more security.”
The price of doing business in the oil and gas sector in Nigeria
continues to climb she concluded. [Note: The International Maritime
Bureau (IMB), a division of the International Chamber of Commerce –
www icc-ccs org – reports that the waters off the Gulf of Guinea
(Nigeria) remain the second worst, with 40 incidents in 2008 to the
Horn of Africa (Somalia) with 42 recorded incidents. The IMB notes
that in 2009 the Horn of Africa will be more intense as Spring comes
due to the large number of foreign warships in the region on active
patrol to ensure the safety and security of vessels. The same
increased security is not expected for Nigeria in 2009. End Note]

¶4. (S/NF) The Ambassador asked what Shell’s thoughts were on any
potential for a coup. Pickard answered that there is little
intellectual capital to plan and execute a coup and Shell sees little
potential for one. Pickard then went on to say that corruption in
the oil sector was worsening by the day. The Ambassador asked for a
few examples. Pickard said that Nigerian entities control the
lifting of many oil cargoes and there are some “very interesting”
people lifting oil (People, she said that were not even in the
industry). As an example she said that oil buyers would pay Nigerian
National Petroleum Corporation (NNPC) General Managing Director
Yar’Adua, (Note: not related to President Yar’Adua. End Note) Chief
Economic Advisor Yakubu, and the First Lady Turai Yar’Adua large
bribes, millions of dollars per tanker, to lift oil. The IOCs
control the liquefied petroleum gas (LPG) cargos, so GON actors do
not have the same opportunity for illicit gain. Pickard also said a
former associate of hers (protect) had told her he had been present
when Attorney General Aondoakaa had told a visitor that he would sign
a document only if the visitor paid $2 million immediately and
another $18 million the next day.

– – – – – – –
VERY BAD BILL
– – – – – – –

¶5. (C) Pickard reported that Shell, Exxon-Mobil and Chevron all have
big license review disputes with the GON. Shell has taken its
dispute to court and the court is supporting Shell’s position.
According to her, Shell is stepping back for the moment, however, to
see how the other two majors negotiation fair, but is not taking its
case out of court yet. The IOCs are quite concerned about the “very
flawed” new petroleum sector energy bill. The bill is silent on what
fiscal regimes would be applied. Shell says that the bill could
reduce the corporation’s overall value in Nigeria. GON discussions
around the bill have mentioned the possibility of moving to five-year
licenses and prohibiting exploring both oil and gas from the same
source, which would contradict how oil and gas extraction works in
practice. The bill is silent on joint ventures; it just states that
NNPC will be incorporated. Pickard said the bill was “likely to sail
through.” The IOCs will be asking U.S., Dutch and U.K. COMs to
convey points on the bill to GON policymakers. (Note: Pickard
mentioned that the IOCs will not share company information directly;
they will hire consultants, like McKinsey, to produce common themes
so the messages from the IOCs to be shared with the relevant
Ambassadors are clear and consistent. End note). Pickard lamented
that the expected cycle of petroleum is at least five years for the
first oil to flow, another 10 years of production to begin to break
even. These numbers change when oil is $40 per barrel instead of $100
per barrel. Hence, a five year license would not be an incentive for
investment and development.

– – – – – –
GAS ISSUES
– – – – – –

¶6. (C) The Ambassador said that the Mission was looking at
performance measures for the economy, i.e. the linkage between the
country’s electricity output and gross domestic product (GDP). The
Ambassador shared that the Mission feels strongly that gas for
feedstock is the key to Nigeria’s power production, which is only
about 2,800 average megawatts for a country of 140 million people.
Pickard agreed and added that the U.S. got it wrong on its domestic
natural gas policies, which it took over 20 years to sort out. So it
is not surprising that Nigeria has it wrong at this point. She said
there is not adequate infrastructure for gas. Gathering plants and
pipelines to carry the product to the power plants still have to be
financed and built. The Nigeria Independent Power Projects (NIPP)
were located where there is no gas and no infrastructure. In
addition, the international oil companies were coerced into building
a power plant each, something they have no expertise in, and they are
scrambling to deliver gas to these plants.

¶7. (S/NF) Pickard agreed that the President’s health is a guessing
game. She said that in her recent meetings with Yar’Auda he seems
alert but drawn in the face and frail. She reported that a Julius
Berger (protect) contact says that the President was not in danger of
dying soon but has serious ailments from which he will never fully
recover. Pickard shared that Berger provides transportation
including planes for the President and has reportedly flown in
doctors and technicians to attend the President (reftel). She said,
for instance, that her Berger contact confided that they flew the
President from Germany to Saudi in September 2008. Additionally, the
Berger contact thought the President would not return to the Villa

ABUJA 00000259 003 OF 003

offices, as they were moving the President’s personal things out of
the Villa. (Note: What we think this means is that Yar’Adua is
spending most of his time in the presidential residence and not in
the Villa offices. End Note).

¶8. (C) The Ambassador asked how comfortable Shell was with the new
appointment of Dr. Rilwanu Lukman as Minister of Petroleum Resources,
and the appointment of Mohammad Sanusi Barkindo as the new NNPC GMD.
Pickard sees the nationalism card cooling with the removal of former
NNPC GMD Yar’Adua, given that new Minister of Petroleum Lukman is
more “pragmatic” and will hold sway over deputy Minister Ajumogobia.
(Note: Ajumogobia’s technical assistant told EconOff in a meeting on
January 14, 2009 that the State Minister was focusing on Gas, since
before the mass cabinet change he was State Minster of Petroleum,
with a separate State Minster for Gas.) End Note. She said she was
also okay with NNPC chief Barkindo. She has worked with Barkindo
several times over the past few decades, especially when they were
both working climate change. She said Barkindo led Nigeria’s
technical delegation to climate change negotiations that produced the
United Nations Framework Convention on Climate Change (UNFCCC)and the
Kyoto protocol to UNFCCC during while he served on its Bureau at
various times. She indicated that although his undergraduate studies
were in political science, he obtained his MBA from Southeastern
University in Washington DC and did postgraduate work in petroleum
economics and management at Oxford University. Although she also said
terms like nationalistic and Chavez she however said that she thought
he could be steered in the right direction on the petroleum sector.

– – – –
COMMENT
– – – –

¶9. (C) Although Pickard clearly seems frustrated with the way things
are going in the maritime security, oil sector legislation, and
corruption which affects Shell’s bottom line, it was useful to hear
that she has hopes for the new Petroleum Minister and NNPC chief.
Septel on the Ambassador’s meeting with new Petroleum Minister Lukman
will address many of these same issues.

SHELL BLOG

Comments

Dirty Rotten Scoundrels: So Shell has been caught with its pants down again, telling blatant lies, this time about the cleanliness of gas. All so that it can improve its clean credentials and make even more $$$. Can we believe anything they tell us? Where would we be without the likes of Friends of the Earth who bring Shell to task. Where does it say we are allowed to lie and mislead in our business principles? This is a great message from the leaders to the worker bees "Do as we say, not as we do". Im sure the paid Shell apologists will come on here and tell us we shouldnt pick on Shell and they are a caring company and we should be greatful for working for them and that John Donovan is to blame.

Bogus Group: A media article has revealed that Shell is already suffering from the legacy of BG Group negligence in maintaining safety critical equipment. The HSE have issued an improvement notice for failing to install gas detection equipment on the Lomond Platform, despite recommendations from two separate studies. A second improvement notice was issued for failing to test a High Integrity Protection System (HIPS) since 2014, despite the associated Performance Standard requirement to test annually. It could be assumed that Finlayson encouraged the infamous Brent TFA during his tenure at the helm of BG to maximise production volumes (an obsession with executives), at the expense of safety system testing. That assumption would not be entirely accurate, the same culture was evident in BG Group long before. Previous failures of a HIPS testing regime had been exposed at another BG operational location, yet despite this no one was held accountable. Maybe if they had been the ‘management team’ in question would not have been implanted in Aberdeen in 2012.
SEE: Shell gets two Lomond warnings from HSE

Who ya kiddin?: This Lower Forever strategy is something that has so obviously been dreamt up by HR and the bean counters so that the company can justify all the savage cost cutting and job culling. I find the company tactics revolting. Anyone with half a brain cell in the oil world knows that its only a matter of time before oil starts to motor upwards.

The second leak, a story in itself, but also what leaked, (HF) hydrogen fluoride is a very dangerous gas when it reacts with the atmosphere, also very harmful to health, look it up. Article does not say what volumes involved but the closure of this super sized plant is a big deal commercially apart from reputation issues.

Doomcaster: As much as I like some of Bill Campbell's articles this latest one is just going a bit too far. there are so many variables which will change the prognosis here that its almost impossible to predict the leakage potential of Prelude. The major ones are location and hydrocarbon profile. I wonder what Bill Campbell would advocate as a solution? It almost appears as if he wants to be in a position to say "I told you so" and not in a supportive mode of "this is what you could do". The safety cases for Prelude do of course look at spill scenarios and remediation is the key, none of us at Shell is naive enough to believe in the 100% carbon loss free situation but common sense, good engineering and good training will do a lot to combat what Bill sees as the inevitable. armchair criticism at its best.

SFA (Say F All): Reading Bill's comments has inspired me to chime in. Ruthless cost cutting is leading to such HSE incidents. The sacking of skilled and experienced staff is taking place all over the place. The risk level is being seen as acceptable where there is heavy cost injection required to be on the safe side. Nobody dares question this due to the HR assassins that are currently patrolling the corridors looking for their next victims.

'avin a larf!: You have to laugh when you read these documents which HR have produced. It must have been written by someone with verbal diarrhea. Expressions like "Focusing capability from both an organisational and locational design perspective to drive productivity, ideation and promote Agile ways of working" show just how far these people are away from the rest of us at the coal face. Some of the invented words (ideation) are superb ! I guess this is all to protect the jobs in HR as someone has to translate this BS into what happens in the real world. It appears we have regressed into the bad old days of buzzword bingo, how many buzzwords can we put into one document. Sigh.

The Fugitive: I am grateful for the information I read in the New York Times as being in the US we are far from whats happening in the American hating HQ. Such job culling decisions are made behind the scenes without just cause or any consultation and then we are told about it when all the decisions are already made. As for this being stolen property, I would love to see Shell try to take John Donovan to the courts again. I'm sure he and his attorney are licking their lips at such a (butt kicking) prospect.

REPLY BY JOHN

Sorry, no prospect of Shell suing me. I have a Shell internal communication stating that they decided long ago that any legal action against me is ruled out. Too much "internal laundry" that they do not want revealed in open court. So I have a free hand to say and publish whatever I want about Shell without fear of retribution. Always sticking to the truth, but perhaps prone to exaggeration as "Cash All Gone" suggests in the nicest possible way.

Cash All Gone: The "leaked" document is not so dramatic as you make it seem - every Shell employee can freely access it, including all the to-be org charts. Everyone should already have had a 1-on-1 conversation with their line manager on whether their job is at risk or not. So Shell is actually very transparently approaching this. On the VP musical chairs - numbers quoted are 50% of VPs would have to leave, and GM level even more. So the cull really cuts right through it...

Shell Job Cuts: How do we know that the Shell document referred to in the Reuters article is not fake? If genuine, and therefore stolen property, why would Shell allow you to publish any of the content?

REPLY BY JOHN DONOVAN

Shell was given the opportunity days ago by myself and more recently by Reuters to take issue with the authenticity of the 88 page document. I supplied extracts and offered BvB sight of the whole document in a security sanitised form. Shell had the option to ask me not to publish (I have accommodated high level requests from Shell previously when grounds were provided) or could have sought an injunction. Shell knew it was authentic and kindly provided comment for Reuters to use in their article.

Good News: PS Cadfael, why do you assume I am a man?

Good News: Cadfael, clearly you're living in the past. It sounds like you are one of those folks who expect you have a job for life. The staff numbers especially in the Head Offices have always been bloated and a legacy of high oil prices. Ben and his management team have taken what most sensible boards would have done. Look, for example, at the costs in Deepwater which have been reduced by over 50% by prudent management and getting rid of the 'good old boy' network. I agree it is not nice for people to lose their jobs, thankfully a lot of the losses have been with the older guys who ran laughing all the way to the bank leaving some of us in good positions. Yes I will look over my back but Shell isn't the only company in the world and people need to realize that protection of jobs comes at a cost. As for Ben looking "an aging, sorry, tired figure", I have never heard so much rubbish. I saw him two days ago and your statement could not be further from the truth. Sad false news I'm afraid.

John Donovan’s ebooks

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